The Nikkei share average fell as much as 2.6% to 20,173.76, its lowest level since Aug. 6, before ending the morning session at 20,258.92, 2.2% lower on the day.
"One wonders how long these trade tariffs on both sides can keep going up and up before they start making the economy and stock market go down and down," said Chris Rupkey, chief financial economist at MUFG Union Bank. "Investors have had enough and want out."
China on Friday imposed tariffs on about $75 billion in imports from the United States including some agricultural products, crude oil and small aircraft.
Hours later, U.S. President Donald Trump heaped an additional 5% duty on some $550 billion in targeted Chinese goods in the latest tit-for-tat escalation between the world's largest economies.
This sent stocks, the dollar and oil prices sharply lower on Friday while safe havens, with all three Wall Street major indexes shedding between 2.4% and 3% on Friday.
The broader Topix shed 1.8% to 1,475.21 by the midday break, with all of Tokyo's 33 subindexes falling.
Machinery and chip-equipment makers were especially hit hard as the new round tariffs triggered profit-taking in companies which rely on China demand.
Yaskawa Electric plunged 6.1% and Fanuc Corp slid 3.7%, while Tokyo Electron, Murata Manufacturing and TDK Corp shed 2.5%, 2.6% and 3.1%, respectively.
Automakers and exporters were broadly lower after the yen gained to 104.46 against the dollar, a level not seen since Jan. 3.
Subaru Corp slid 2.1% and Panasonic Corp dropped 2.3%.
A strong yen reduces corporate profits when they are repatriated. The yen last stood at 105.25 yen to the dollar.
President Trump and Japanese Prime Minister Shinzo Abe said late Sunday that the United States and Japan agreed in principle to core elements of a trade deal they hoped to sign in New York next month.
U.S. Trade Representative Robert Lighthizer said the deal covered agriculture, industrial tariffs and digital trade, and that auto tariffs would remain unchanged.
"Developments over the weekend have taken U.S.-China trade war to a whole different level. No one can be naive enough to think this will end anytime soon," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley.